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Entertainment Industry Analysis: Prepared by Team 10
Entertainment Industry Analysis: Prepared by Team 10
Industry Analysis
Prepared by Team 10:
Nicole Abercrombie
Rachel Austin
Jessica Elia
Jessica Reed
Jenni Torres
TABLE OF CONTENTS
Introduction ------------------------------------------------------------------------------------------------------------------- 4
Dominant Economic Indicator -------------------------------------------------------------------------------------------- 6
1. Market Size: ----------------------------------------------------------------------------------------------------------- 6
2. Scope of Competitive Rivalry: ------------------------------------------------------------------------------------ 5
3. Market Growth Rate: ----------------------------------------------------------------------------------------------- 7
4. Numbers of Companies in the Industry:----------------------------------------------------------------------- 7
5. Customers: ------------------------------------------------------------------------------------------------------------- 9
6. Degree of Vertical Integration: --------------------------------------------------------------------------------- 10
7. Ease of entry/exit: -------------------------------------------------------------------------------------------------- 10
8. Technology/Innovation: ------------------------------------------------------------------------------------------ 10
9. Product Characteristics: -------------------------------------------------- Error! Bookmark not defined.1
10. Scale Economies: -------------------------------------------------------------Error! Bookmark not defined.
11. Experience Cure Effects ------------------------------------------------------------------------------------12
12. Capacity Utilization -----------------------------------------------------------------------------------------11
13. Industry Profitability:----------------------------------------------------- Error! Bookmark not defined.3
Six Forces of Competition ------------------------------------------------------------------------------------------------ 13
1. Threat of New Entrants ------------------------------------------------------------------------------------------ 123
2. Bargaining Power of Suppliers --------------------------------------------------------------------------------- 134
3. Bargaining Power of Buyers ------------------------------------------------------------------------------------ 134
4. Threat of Substitute Products/Services ---------------------------------------------------------------------- 145
5. Intensity of Rivalry among Competitors-------------------------------------------------------------------- 145
6. Relative Power of Other Stakeholders ----------------------------------------------------------------------- 156
Competitive Position of Major Entertainment Companies ---------------- Error! Bookmark not defined.7
Competitor Analysis ---------------------------------------------------------------- Error! Bookmark not defined.9
News Corp. ----------------------------------------------------------------------- Error! Bookmark not defined.9
Time Warner ------------------------------------------------------------------------------------------------------------ 20
Viacom Inc. -------------------------------------------------------------------------------------------------------------- 21
CBS --------------------------------------------------------------------------------- Error! Bookmark not defined.1
Key Success Factors ---------------------------------------------------------------- Error! Bookmark not defined.2
Industry Prospects and Overall Attractiveness ------------------------------- Error! Bookmark not defined.5
Factors Making the Industry Unattractive ------------------------------------ Error! Bookmark not defined.7
Profit Outlook----------------------------------------------------------------------------------------------------------- 28
Conclusion ------------------------------------------------------------------------------------------------------------------- 30
References:---------------------------------------------------------------------------- Error! Bookmark not defined.1
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INTRODUCTION
The following report is an analysis of the diversified entertainment industry. The
entertainment industry is a constantly evolving group of corporations with limited competitive
pressures. Revenue trends in certain core segments, including broadcast television, media
networks and radio, tend to vary with consumers' and advertisers' preferences towards new forms
of media (Value Line, 2010). As long as people have had discretionary time and money, the
entertainment industry has thrived, and as personal incomes grew, so did the industry. Although
the entertainment industry has proven to be quite resilient even in times of tough economic
conditions, the most recent economic downturn has had a noticeable negative impact. Even with
many large mergers and acquisitions throughout 2009 and 2010, including the Disney’s
acquisition of Pixar and Marvel, and the planned merger of Comcast and NBC Universal, current
stocks are dropping across the industry at an average decrease of 1.18 % (i.e., Disney’s stock
dropped 5.1%). According to Price Water House Coopers (PWC), this trend will not continue
and growth in projected to be positive over the next five years (approximately 5%). Below is a
forward looking chart listing both current values and encouraging projected values for the
Entertainment and Media industry.
Entertainment & Media Industry Overview
Amount Unit Date Source
Total U.S. Communications & Media Spending 1.092 Tril. US$ 2010 VSS
Total U.S. Communications & Media Spending (projection) 1.416 Tril. US$ 2014 VSS
U.S. Advertising Revenues, including local outlets (preliminary) 166.4 Bil. US$ 2010 Magna
Global Media Suppliers Advertising Revenue (preliminary) 389.8 Bil. US$ 2010 Magna
Global Media Suppliers Advertising Revenue (forecast) 412.0 Bil. US$ 2011 Magna
RADIO
Full Service FM Radio Stations, Including Educational, U.S. 9,844 Dec-10 FCC
Licensed AM Radio Stations, U.S. (Daytime/Unlimited) 4,812 Dec-10 FCC
PRINT MEDIA
U.S. Magazine Advertising Revenues, PIB Measured Magazines 19.5 Bil. US$ 2009 PIB
Total Daily & Sunday Newspapers, U.S. 2,298 2009 E&P
Total Daily & Sunday Newspaper Circulation, U.S. 46.2 Mil. 2009 E&P
Total Daily & Sunday Newspaper Circulation, U.S. (historical) 59.4 Mil. 2000 E&P
Annual Newspaper Advertising Expenditures, U.S. (Print &
27.6 Bil. US$ 2009 NAA
Online)
Value of Books Sold by U.S. Publishers 23.9 Bil. US$ 2009 AAP
E-books as a percent of Trade Book Sales, U.S. 8.70 % Oct-10 AAP
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The economic downturn continues to take an increasing toll on the entertainment industry
resulting in a declining Gross Domestic Product (GDP) that has thus reduced the amount of
discretionary consumer spending, and company advertising compounding the variables in this
dynamic industry. This major state of transformation is the light at the end of the tunnel and is
seen as the result of economic distressed consumers looking for low-cost entertainment and
companies looking for new, innovative ways to fulfill those consumer needs. The desire for
increased value has caused the consumer to turn to digital media and the industry to focus on the
digital media value chain. As mentioned by PWC, “The Entertainment Industry that entered this
recession will not be the same industry to come out of it” (PWC, 2010).
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This report includes discussion of the Dominant Economic Characteristics; Six Forces of
Competition; Competitive Position of Major Companies and Competitor Analysis; Key Success
Factors; Industry Prospects and Overall Attractiveness; and final conclusions and discussion of
the overall entertainment industry.
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spanning movies, music, internet, and television. This can diffuse dependency and limit the short
term economic pressure in any particular area. However, emerging technologies are changing the
competitive environment and causing the competition to intensify. Apple Inc. and Microsoft are
now competitors in the mobile entertainment sector and online gaming markets. Leaders in the
industry such as Disney, are holding on to their market dominance by excelling as ‘analyzers’ in
their strategic characteristics by staying diversified in more stable sectors of the entertainment
industry and focusing on innovation into the emerging media sectors.
Competition between print media and online resources is increasing. Per Plunkett
Research, newspapers are finding it increasingly difficult to compete against internet news and
advertising rivals and book sales are facing a decline due to the emergence of ebooks in 2010.
Main factors of competitive rivalry:
Alternative delivery methods (in all sectors): Consumer demands are changing
rapidly towards the ease of access of mobile and online entertainment platforms.
New technology improvements: For example, the electronic book readers such as
Amazon’s Kindle and Apple Inc’s iPad as well as 3D technology.
Cost of entertainment venues: The cost of concerts and movie tickets are a key
concern to consumers in the current economic condition where many are facing
reductions in incomes and discretionary spending. Lower prices compete as a larger
factor than quality or star appeal in this climate.
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The figure below (United States movies & entertainment market value forecast),
illustrates the projected growth in the movie and entertainment market over five years from 2009
through 2014 and shows steady, yet moderate growth.
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Below is a summary of the financial highlights of the top three companies in the industry:
Customers
Despite the downturn in the economy in the last few years, many consumers continued to
show interest in the evolving entertainment industry. There are millions of customers for each
section of the entertainment industry from movie, home video, television, media networks,
gaming, etc.
In digital media segment the number of broadband internet connections in the US has
reached roughly 100 million homes and business, in addition to another 75 million mobile
internet subscribers by the end of 2010 (Plunkett Research). More internet-enabled television
sets are being produced which is creating a shift in customers from the traditional cable network
viewing to the online streaming networks. This ease of access to programming previously limited
to traditional viewing and the lowered cost of this emerging access chain is creating challenges
to the business plans of many entertainment companies. The times have changed where
customers have more control over their programming and entertainment options and are no
longer ‘captive’ audiences who plan their schedules around their favorite shows.
In the last few years, the customers demand for control over their media - how and what
they watch, read and listen - has dramatically increased. The greatest growth in this demand is
noted in the younger demographic. Media and mobile access to movies, gaming, books and
television programming is increasingly sought after. Growth in consumer control is projected to
continue increase in the industry into the future.
Customers in the global economy are also increasing rapidly due to the emergence of
middle classes in developing nations and the spread of internet access and cell phone use
worldwide. Companies such as Disney and Time Warner are reacting proactively to this change
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in customer base and have incorporated strategic plans for expansion into the emerging global
marketplace.
Ease of entry/exit
The ease of entry/exit is low in the entertainment industry as a whole, but with the
emerging technology segments the likelihood of new entrants is moderate. Currently, successful
new entrants in the video distribution sector are also large corporations such as Google Inc. and
Apple Inc.
As mentioned previously, the top market leaders are conglomerate corporations
encompassing a broad range of entertainment sectors including media networks, and filmmaking
which create a strong barrier to entry in those sectors. However, consumer interest in
independent films, for example, continues where fixed costs of film production are lower and the
threat of entry from large corporations in that sector is reduced only by the nature of the
independent film environment.
Technology/Innovation
Technology and innovation are key players in the industry and are the driving force of
competition. Market leaders are diversifying from traditional entertainment sectors into the
emerging technological advanced areas such as 3D films, online media platforms, and mobile
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access to programming. The driving force of more customer control is shaping the innovations in
the entertainment industry.
Top new technologies and innovations for the entertainment industry:
3D filmmaking and programming.
Online video and programming distribution.
Digital and ebook innovations and distributions.
Multipurpose cell phones with video and TV programming capabilities.
Product Characteristics
The entertainment industry is composed of multiple segments, with varying services and
products. In the past, the entertainment industry was centralized in movies, filmmaking and print
media sectors. Today’s innovations and technological advances have broadly opened the doors to
new entertainment mediums and distributions.
Along with technology, consumers are another driving force in the development of
entertainment products and services characteristics. The recent economic downturn has reduced
discretionary incomes and affected consumer spending on entertainment products and services.
For example, the past few years has resulted in a dramatic change in the production of DVD’s,
CD’s and their distribution channels. Consumers are increasingly utilizing “on-demand” viewing
of movies and online streaming of songs through avenues such as iTunes which also boast lower
costs to the consumer. Through these newer distribution channels, consumers have altered the
characteristics of the traditional movie experience to include “on-the-go” viewing and one time
viewing purchases through online and cable networks.
Due to the unique position of the entertainment industry including what some segments
of the market consider “luxury” items, the need for strategic flexibility in entertainment
companies in all the products and services they offer is paramount.
Scale Economies
Economies of scale refer to the increase in efficiency of production as the number of
goods being produced increases. (Investopedia) Economies of scale are necessary to produce the
big-budget epic films that are the building blocks of a profitable movie franchise. Disney’s
purchase of Marvel in 2009 expanded their economy of scale in the movie and animation sector
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of the entertainment industry. The result of years of achieving these types of mergers and
acquisitions by industry leaders such as Disney and Time Warner, further support the ‘bigger is
better’ economy of scale scenario in the broader more diversified entertainment industry.
Smaller companies within this industry, such as Netflix, have effectively handled the size
verses efficiency scope by altering the services they offer to online distributions with less
overhead costs.
Capacity Utilization
Capacity utilization and constraints are linked. Many areas of the entertainment industry
including filmmaking, media networks and theme parks require large amounts of capital to
maintain and improve.
In the entertainment industry the diversity of services and products as well as the avenues
of delivery increase the dependency on the profit mix. With the rapid advancements in
technology, the capacity for new avenues of entertainment have not been reached and the limits
are yet unknown.
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Industry Profitability
The entertainment industry is in a rapidly evolving market with external pressures of
technology, consumer demand and innovation. A few hundred companies existing in the industry
contribute to the industry total revenue of roughly $295 million. The profitability of the
individual companies rests on their diversification, innovation, and ability to produce affordable
products and services to consumers. The profitability of the companies also relies on their
individual capacity for marketing, and competitive intelligence.
The global market with increasing middle class incomes is also increasing demand
internationally for many entertainment sectors. This coupled with brand loyalty and innovation
leaves the industry in a positive position looking forward. Based in Yahoo Finance’s evaluation
quarterly revenue growth is expected to be 9.40% for the industry.
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The high, ongoing financial outlay needed for movie production, or television series
production is also extremely high. For example, production costs for Disney’s Pirates of the
Caribbean movie hit nearly $300 million. High sunk costs and capital requirements are also
heavy entry barriers.
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battling cable and satellite TV firms for market share (Plunkett Research, 2010). Tough
economic times often results in a dog-eat-dog business environment but the opposite can also
seen in the entertainment industry.
A strategy being implemented across the industry is one of collaboration in order to gain a larger
market share and competitive advantage against other industry leaders and collaborators. The
goal of industry leaders is to be the leading pioneer in digital entertainment and create entry
barriers for new entrants once growth becomes more obvious.
The accompanying chart (Chart: Mobile markets in selected countries, above) compares
the five-year compound annual
growth (CAGR) of mobile Internet
subscribers in several countries with
five-year CAGR for mobile Internet
content and advertising revenues in
the same markets which shows the
potential revenue to be generated
over the next five years. The visual
representation shows that the
market growth is great but the digital spending growth is much slower in comparison (Chart:
Global digital and non-digital spending growth, below). Long-term benefits will far exceed the
current costs of implementing new strategies that develop the mobile/digital value chain which
will ultimately result in large profits. Collaboration will reduce the cost of innovations and
increase market share of collaborating companies while encouraging other collaborations
resulting in fewer high quality products and services. The new digital value chain has become a
focus of many companies and the “anytime anywhere” mobile experience of consumers is the
driver. In 2010 and already in 2011, many companies are introducing new mobile devices that
make the digital environment a new and exciting media experience with future growth potential.
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the industry is a high priority. Unions can have a detrimental effect if members do not feel that
they are being treated fairly or they are not receiving the compensation they feel they deserve.
Governments set and regulate laws that must be followed and abided by or companies will face
legal repercussions. The Federal Commerce Commission (FCC) and the Department of Justice
(DOJ) monitor content, as well as anti-trust and concentration violations. The FCC has the power
to fine or eliminate programs that violate content restrictions. This was determined to be the case
with the Howard Stern Show resulting in fines in the amount of $2.5 million. Special interest
groups such as environmentalists motivate the industry to remain socially responsible and make
environmental sustainability a primary concern on the corporate agenda. Shareholders invest
their money in the future profitability of individual companies, if performance is in doubt,
interest in the company can be sold resulting in lower stock price. Creditors are also interested in
the future profitability of the industry which will determine the likelihood of the company being
approved for funds to support investments.
The chart below represents the overall the financial position of the three leading
companies in the entertainment industry: Disney, News Corp., and Time Warner, Inc.. The
vertical axis represents the total amount of Net Income earned by each entertainment company,
the horizontal axis represents the market capital each company has worldwide, and the circles
represent the total assets possessed by each entertainment company (figures shown in billions of
dollars)
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.
The chart below shows a comparison of each competitor in the areas of market cap, total
employees, projected quarterly revenue growth, total revenue, gross margin, earnings before
interest/tax/depreciation, operating margins, net income, earnings per share, price earnings ratio,
stock price earnings growth, and stock price/sales per share.
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Competitor Analysis
News Corp.
News Corp. was founded in 1922 and is based in New York, New York. The mission of
the company is to create and distribute top-quality news, sports, and entertainment around the
world. Currently News Corp. is divided into many different entertainment segments including
cable network programming, filmed entertainment, television, direct broadcast satellite
television, and publishing. News Corp. currently operates in the U.S., Latin American, European,
and Asian markets.
News Corp. is widely known for its broadcasting of FOX and for coming out with box
office hits such as RIO, Black Swan, and Avatar. They have recently gained a lot of popularity
with their hit series Glee. One of News Corp.’s biggest accomplishments for 2010 was tapping
into the 3D video market with its release of Avatar (its most successful movie). According to the
2010 annual report, this was a big risk but turned out to be well worth it.
News Corp. will continue on its path in 3D film making and plans to continue to release
3D films in the upcoming years. Rupert Murdoch (CEO) also plans on embracing innovation and
technology as a good way to move the company forward into the future.
News Corp.’s biggest growth driver is their cable network programming segment with a
37% increase in operating income from 2009 to 2010; showing overall growing sales, revenue
and net income from 2009 to 2010. Fox broadcasting was also ranked the number one television
network in the US.
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Time Warner
Time Warner was founded in 1985 and is headquartered in New York, New York. They
are the third largest media conglomerate behind Disney and News Corp. They operate in three
main segments; television, film, and publishing. Time Warner is best known for its cable
network programs CNN, TBS, and TNT. They also feature pay TV channels like HBO and
Cinemax. In the film sector Time Warner produces films through Warner Bros. Pictures and
Newline Cinema. In the past year some of Time Warner's most successful films include Harry
Potter The Deathly Hollows and Inception (winner of 4 academy awards).
Time Warner is a global leader in media and its mission is to create, package, and deliver
high quality content worldwide through multiple distribution outlets. According to the 2010
annual report, Time Warner is currently following a multi-year plan to become the premier
global content company and to improve returns. 2010 saw benefit of this plan when they posted a
17% growth in operating income (the highest growth in years) ; showing slight increases in sales,
revenue and net income from 2009 to 2010. This multi-year plan includes sticking to four key
strategic objectives
A major focus for Time Warner is the increased ease of access to their content for
consumers. They have recently launched TVE (TV Everywhere) so that consumers can have
access to content via mobile devices at no additional cost. Time Warner also puts the expansion
into international markets at the top of their priorities list. They plan to accomplish this by
continuing to expand globally through the acquisition of international television networks.
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CBS
CBS is another entertainment company who is also headquartered in New York, New
York. CBS is different from other entertainment companies in that they do not operate in the
filmed entertainment sector. CBS focuses on television, radio, online content, and publishing
sectors of the entertainment industry. CBS shows positive revenues despite the fact that they do
not make any profit off the filmed entertainment sector like the leaders of the industry report.
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Due to this factor, CBS is not in direct competition with Disney, News. Corp, Time Warner, and
Viacom Inc., even though they are considered to operate in the same industry.
Vision
For a company to succeed in any industry, it must have a clear vision of where it sees
itself or where it would like to be in the future. Vision provides direction for a company’s
mission and acts as a foundation for building a strategy for how to achieve that mission. It is also
therefore important that a company employ a management team and a board of directors that can
effectively dictate the vision to the rest of the company and direct the firm toward achieving its
goals. If a company is too concerned with where it currently stands and neglects to look forward,
its vision is so near-sighted and narrowly focused that it will fail to recognize when it is headed
in a direction that is not aligned with its mission.
Demographic Appeal
Demographics include age, gender, race, religion, education level, income, location, and
others. If a company appeals to a demographic, it means that the company offers something that
customers are attracted to. The pretense of satisfaction is immediate because customers are
already attracted to the idea and even the idea is enticing; genuine satisfaction is almost
imminent. The wider the demographic appeal, the wider the probable satisfied customer base.
Customer satisfaction is a necessity in the entertainment industry because satisfied customers
keep coming back for more. Furthermore, considering the fact that conglomerates dominate the
entertainment industry, if a company succeeds in entertaining customers, the odds are in their
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favor that those customers will also be attracted to their other products in other business
segments.
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sales-to-fixed-assets ratio increases over time, this indicates the company is efficiently utilizing
its investments in fixed assets. A lower sales-to-fixed-assets ratio indicates the company is
utilizing its assets inefficiently or its fixed assets are becoming obsolete.
Technological Know-How
In this day and age, improvements in technology are advancing rapidly and companies
must strive to be leaders in innovation and creativity in order to stay ahead of the competition.
Companies in the entertainment industry have to invest more money into research and
development to come out with innovative new processes, like 3Dimensional filmmaking. Further
efforts are seen in the prevention of music and movie piracy, such as; encryption methods to
prevent DVD copying; and improvements of media internet capabilities, like the shift in gaming
platforms from home gaming consoles to the online and mobile gaming experience. The key to
innovative success is to increase opportunities to collaborate and attain secure deals with
inventors of new technology before less ambitious companies.
Safety
Amusement parks provide an extensive safety and regulatory challenge for a couple of
the largest leaders in the entertainment industry, most notably Disney. NBCUniversal owns the
Universal Studios theme parks, and at one point, Time Warner owned the Six Flags franchise. To
stay on top of regulations surrounding consumer safety, companies in the entertainment industry
need to incorporate safety measures into every aspect of attraction-design. Best practices should
be adopted from related industries and new safety technologies should be developed in order for
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a company to comply with safety regulations and internal standards. The key to success when it
comes to safety is consistent monitoring of the controls and operations of attractions. Consumer
safety should be considered as utmost importance for entertainment companies involved in the
amusement park business segment of the industry.
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seems like a large number consumers are willing to sit through advertisements in order to watch
their favorite television programs during times that are the most convenient for them.
Hulu is co-owned by The Walt Disney Company, News Corporation, and NBC
Universal. The article notes that the success of Hulu is also stirring rumors that the company may
soon allow public offerings. The second most lucrative online TV site is the CW. The network is
partially owned by Time Warner. The IHS noted, “That website grew by 50% last year, but its
revenue soared a whopping 300% to $16.5 million. That's because it sold 23 ads per show, on
average.” The strongly competitive market has also allowed TV Networks to look for
alternatives in case the online viewing of television later collapses. Apple is the organization to
which skeptical Networks turn to as the organization currently offering customized downloading
services through iTunes that allow consumers to pay a onetime fee without ever seeing any
commercials on their download.
With Networks battling for viewership wars consumers have the increased opportunity to
be selective and pick and choose which programming best suits them. Many consumers may feel
as though the extra commercials are fine while others will gravitate to ad-free digital content.
Both sides of the industry will profit as will consumers who want to watch “their regularly
scheduled programming,” whenever they like.
Studio Entertainment
While big budget films are the most widely viewed, the niche film audience is still strong
and many studios in the industry are catering to that specific target market. Sony Pictures
Classics co-president Tom Bernard found, “Everyone wants to say indie distribution is totally
screwed, but it has never been healthier. More theaters are playing independent films made
specifically for a specialty audience than ever before," (Filling Up). Bernard’s division releases
about 20 films per year and theatre giants such as the Regal Entertainment Group and Cinemark
dedicate screens just for independent and niche films. The popularity of these movies not only
attracts more consumers but also contributes to profits for independent film studios.
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Casino Resorts
CNN Money in conjunction with Fortune 500 released a list titled, “20 biggest money
losers,” and the MGM Resorts International was ranked seventh. In 2010 the organization lost
$1.4 billion. “This casino operator's big business is Las Vegas, which has seen an unprecedented
drop in spending - especially around gambling - in the last few years. Consumers aren't the only
ones who have tightened their purse strings; businesses have cut travel budgets, leading to a drop
in convention activity.” MGM also lost money after a joint venture with Dubai World to create
City Center resort and casino didn’t increase in market value. The organization misjudged the
market and the potential of fewer consumers before realizing that adding another casino in Las
Vegas was not an urgent priority to implement. Caesars Entertainment, ranked sixteenth, was
also hit hard by the economy. Their 2010 losses totaled $831.1 million.
Studio Entertainment
While the entertainment industry allows for many creative and innovating processes
studio entertainment appears to suffer from oversaturation. The success of Avatar and Alice in
Wonderland, revamped the 3D movie industry. Soon after that initial breakthrough dozens of
films were released in 3D and many had the rendering of 3D effects added after production
which caused the special effects to appear in a much lower quality compared to the more
expensive and timely high definition 3D production process. As ticket prices started to increase
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movie goers have begun to realize that going to see a movie on the weekend is no longer a cheap
activity to do with the whole family and consumer demand has decreased slightly.
Another problem in the studio entertainment sector is the low sales of DVDs and Blu-ray
discs. The magazine USA Today blamed the low sales on the “lackluster lineup of theatrical
releases. DVD and Blu-ray disc movie sales totaled nearly $2.1 billion in the first three months
of 2011, nearly 20% below the year-ago quarter,” says Digital Entertainment Group, the industry
trade organization that includes the Hollywood studios. Even though Blu-ray releases increased
by 10% the money lost could not recoup from the decline in sales of DVDs. The article
determined the overall sales drop for movie discs was due to the poor box-office performance of
the new movie releases “hitting retail in the first quarter - 25% below movies released in first
quarter 2010 according to executive director Amy Jo Smith.” Also now due to the integration of
technology in our everyday lives instead or buying a DVD or Blu-ray, or renting a movie from
Blockbuster, consumers can stream newly released movies onto their televisions or computers
just by signing up for Netflix.
Profit Outlook
Based on financial reports complied by Fortune 500 the entertainment industry appears to
be holding on to marginal profits in 2010. The chart below ranks the top seven entertainment
industry giants by earned revenues and profits. Walt Disney is performing the best both in
revenues and profits but compared to Live Nation which primarily focuses on music, Disney has
many differing segments of their organization (i.e., media, studio, parks and resorts) to draw
revenues from. At the time of this report, News Corp., CC Media Holdings or Live Nation had
not released their profit results. The results released by Viacom show shareholders and potential
investors the organizations profits are decreasing from last year.
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The second chart below from Fortune 500 shows the top seven entertainment leaders
ranked by earnings per share, total return to investors and number of employees instead of profits
and revenue.
2011: Industry: Earnings Per Share Total Return to Investors Employees
Entertainment
Rank Company 2000-2010 Annual 2000-2010 2010 Number % change
growth (%) Annual rate (%) (%) from 2009
1 Walt Disney 13.5 3.8 17.6 149,000 3.5
2 News Corp. N.A. N.A. 7.4 51,000 -7.3
3 Time Warner 4.6 -9.6 13.4 32,000 3.2
4 CBS N.A. -7.9 37.5 25,380 -0.8
5 Viacom N.A. N.A. 34.9 10,900 -2.7
6 CC Media Holdings N.A. -14.5 190.3 20,283 5.1
7 Live Nation N.A. N.A. 34.2 6,500 51.2
Entertainment
Issue date: May 23, 2011
The current economic crisis has affected companies around the world and in many
industries. In light of this, declines in employee numbers across these organizations are
understandable. Even though the increase in employees since 2009 was low for Walt Disney
Company and Time Warner both organizations show growth in the industry and in turn,
increased employee numbers. The initial review of Live Nation Entertainment’s high percentage
change in the number of employees was alarming, however, one possible reasoning of the
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increase of employees could be the result of rehires if the organization laid off too many
employees the previous year in response to organizational budget cuts.
CONCLUSIONS
In recent years, the entertainment industry has faced vast changes in technology and
consumer market demands with the increase in multi-format cellphones, internet and broadband
capabilities for programming, marketing, and movie viewing. Industry leaders must adapt and
stay flexible in these changing economic times. It is the consumer who is demanding more
control of their entertainment choices now and companies need to continue to respond quickly or
face the threat of substitution from competition. Analysts predict that the entertainment industry
will see improvements in profits and growth faster than some other industries despite the tighter
purse strings of many consumers.
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BIBLIOGRAPHY
"20 biggest money losers." CNN Money. Fortune 500, 05 May 2011. Web. 9 May 2011.
<http://money.cnn.com/galleries/2011/fortune/1104/gallery.fortune500_money_losers.fortun
e/7.html>.
"20 biggest money losers." CNN Money. Fortune 500, 05 May 2011. Web. 9 May 2011.
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